While most of the country don’t pay sales tax to online retailers like Amazon, most customers are still supposed to pay those taxes to the state. No one does, of course, which is why the California State Board of Equalization is looking into the prospect of going after residents who have made more than $5,000 in online purchases in the hope of getting paid.
The proposal would pay third-party vendors for identifying those California residents who have spent the most online without paying sales tax.
Under what was characterized in the agenda as a “Use Tax Gap Pilot Proposal,” the staff asked that the BOE authorize a contract worth $7 million to $10 million for information on untaxed purchases made by state residents. The proposal states that “vendors have approached BOE staff to offer the sale of data on purchase transactions between out-of-state retailers and California consumers,” and while the staff has yet to see the information “we do believe the data exists and may be useful.” The contract would be “performance-based”–meaning the vendors would only be paid if the data produced extra revenue through “self-compliance or enforcement efforts.” According to the proposal, the state would expect to collect three times the amount it pays out under the contract.
The proposal was originally on the Board’s agenda for its three-day meeting that begins today but has since been pulled.
“[BOE Chairman Jerome Horton] had some concerns,” a rep for the Board tells Forbes. “He wanted staff to look at it a little further.”
The article points out that there are precedents for states going after use tax. The tax authorities in Virginia use info it gets from North Carolina to collect tax from VA residents who buy furniture in NC and have it shipped across the state line.
As we reported last week, many large retailers are behind the push to force online retailers to collect sales tax in all applicable states.